Tuesday, July 24, 2007

There is an interesting piece by James Surowiecki in this week's New Yorker. The argument that more regulation can (at least in some cases) enable individuals to make decisions closer to what they really want - or, conversely, that an unregulated market may prevent people from doing what they really want to - is in itself interesting. It is also pleasantly refreshing; as of late, one would conclude from reading the mainstream media that being free-market based (or as unregulated as possible) constitutes a valid criterion per se to evaluate the quality of a policy decision.

Americans may want to buy the biggest and most environmentally damaging vehicles available, but polls show that, given an option, some three-quarters of them vote for dramatic increases in fuel-economy standards

Back in the nineteen-seventies, an economist named Thomas Schelling, who later won the Nobel Prize, noticed something peculiar about the N.H.L. At the time, players were allowed, but not required, to wear helmets, and most players chose to go helmet-less, despite the risk of severe head trauma. But when they were asked in secret ballots most players also said that the league should require them to wear helmets.

The players wanted to have their heads protected, but as individuals they couldn’t afford to jeopardize their effectiveness on the ice. Making helmets compulsory eliminated the dilemma

Without the rule, the players’ individually rational decisions added up to a collectively irrational result. With the rule, the outcome was closer to what players really wanted.